Citing uncertain inflation, BSP defies dovish market bet by holding rates steady

The Bangko Sentral ng Pilipinas (BSP) held its benchmark interest rate steady at 5.75 percent on Thursday, Feb. 13, 2025, going against market expectations of a 25-basis point cut.

Key takeaways from BSP’s decision:

• BSP kept the key interest rate at 5.75 percent, defying expectations of a 25-basis point cut.
• Inflation forecast for 2025 rose to 3.5 percent, while the 2026 outlook stayed at 3.7 percent.
• Risks to inflation are now broadly balanced but remain sensitive to utilities costs.
• BSP cited global economic uncertainty as a key reason for maintaining rates.
• The central bank signaled a cautious approach to future rate cuts, staying data-driven.

The decision underscores the central bank’s cautious stance amid persistent inflation risks and global economic uncertainty.

At its first monetary policy meeting of 2025, the Monetary Board also kept the overnight deposit and lending facility rates at 5.25% and 6.25%, respectively.

BSP Governor Eli Remolona Jr. said inflation projections for 2025 rose slightly to 3.5 percent from 3.4 percent in December, while the 2026 forecast remained at 3.7 percent.

While inflation expectations remain within target, risks such as higher utility costs persist, he said.

BSP officials acknowledged that domestic growth prospects remain firm, but heightened global policy uncertainty influenced their decision to hold rates steady. The central bank signaled a gradual shift toward easing but emphasized the need for further assessment before cutting rates.

The decision comes as financial markets had largely priced in a rate reduction. Analysts expect the BSP to begin monetary easing later this year, contingent on inflation developments and global economic conditions.

Remolona also reaffirmed the central bank’s commitment to data-driven policies to balance growth and price stability.